``Short-term debt markets have been under considerable strain in recent weeks'' as it got tougher for funds to meet withdrawal requests, the Fed said in a statement in Washington. About $500 billion has flowed out of prime money-market funds since August, a Fed official said.

The initiative is the third government effort to aid money- market funds, which in stable times are a key source of financing for banks and companies. The exodus of investors, sparked by losses from the aftermath of the Lehman Brothers Holdings Inc. bankruptcy, contributed to the freezing of credit that threatens to tip the economy into a prolonged recession.

``The problem was much worse than we thought,'' Jim Bianco, president of Chicago-based Bianco Research LLC, said in a Bloomberg Television interview. Policy makers are trying to prevent ``Great Depression II'' by stemming the financial industry's contraction, he said...

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Sarah Lyall / NY Times:Memo From London: Dear Prudence: Recession May Bring Return of Traditional Values -- The expensive stores along Bond Street and Sloane Street have fallen eerily quiet, as have the cheaper ones scattered all over town. Britons are coming down from their huge spending spree, and alarm about the future is coursing through the nation like an electric current, as it is everywhere. But there is a parallel thought in the air: perhaps the downturn, however painful, will lead to a return to the values of the past. Perhaps the last 15 years or so will be considered a sort of madness, an anomaly, a strange dream...

Wendy Koch / USA Today:Homeless numbers ‘alarming’ -- More families with children are becoming homeless as they face mounting economic pressures, including mortgage foreclosures, according to a USA TODAY survey of a dozen of the largest cities in the nation...

FORECLOSURES INCREASING -- A surge in families seeking housing aid or shelter has followed rising home foreclosures nationwide.Foreclosures Jan.-Aug.

With the global financial system in serious trouble, is America's geostrategic dominance likely to diminish? If so, what would that mean?

One immediate implication of the crisis that began on Wall Street and spread across the world is that the primary instruments of U.S. foreign policy will be crimped. The next president will face an entirely new and adverse fiscal position. Estimates of this year's federal budget deficit already show that it has jumped $237 billion from last year, to $407 billion. With families and businesses hurting, there will be calls for various and expensive domestic relief programs.